Annual report pursuant to Section 13 and 15(d)

9. Commitments and Contingencies

9. Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

We are involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.

Leases

On August 1, 2013, the Company entered into a non-cancellable lease at a Santa Barbara Facility with a 5-year term, expiring July 31, 2018 at a monthly rent of $6,000 as amended in February 2014. Effective May 1, 2016, the Company vacated the Santa Barbara Facility and subleased the space through the term of the master lease, terminating July 31, 2018 at $4,500 per month. The Company subsequently terminated both the master lease and sublease effective March 1, 2017 and as a result, the Company accrued $6,000 to account for the termination fees in the Santa Barbara Facility lease agreement which is reflected in as part of Accounts Payable and accrued expense on the accompanying consolidated balance sheet.

Effective June 1, 2016, the Company relocated its Santa Barbara office to an office space located at 5266 Hollister Avenue, Suite 219, Santa Barbara, CA 93111, under a twelve-month lease at a lease rate of $751 per month.

Total rent expense during the years ended December 31, 2016 and 2015, was $45,000 and $70,000, respectively which are included as part of Operating Expenses in the attached consolidated statements of operations.

Contractual Commitments

The Company’s contractual commitments for future periods, including office leases, minimum guaranteed compensation payments and other agreements as described in the following table and associated footnotes:

Year ending December 31,	Office Lease (1)		License Agreements (2)		Compensation Agreements (3)		Total Obligations
2017	$	4,000	$	187,500	$	536,300	$	727,800
2018		–		187,500		598,400		785,900
2019		–		187,500		149,600		373,100
2020		–		187,500		–		187,500
2021		–		187,500		–		187,500
Total	$	4,000	$	937,500	$	1,284,300	$	2,225,800

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	(1)	Consists of rent for the Company’s Santa Barbara Hollister office expiring on May 31, 2017.
	(2)	Consists of license maintenance fees to Temple University in the amount of $187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party.
	(3)	Consists of base salary and certain contractually-provided benefits, to i) an executive officer, pursuant to an employment agreement at a base annual salary of $290,000 through March 31, 2017 and severance in the amount of $580,000 that will be paid through March 31, 2019 pursuant to a separation agreement effective April 1, 2017; ii) an executive officer, pursuant to a two-year employment agreement effective April 1, 2017 at a base annual salary of $150,000 per year under a two-year contract effective April 1, 2017; iii) an executive officer, pursuant to an employment agreement at a base annual salary of $158,400 per year; and iv) and a severance agreement of a former officer in the amount of $15,000.